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Pound and stocks plummet as US inflation raises recession fears

US inflation CPI Federal Reserve interest rates pound dollar - Al Drago/Bloomberg
US inflation CPI Federal Reserve interest rates pound dollar - Al Drago/Bloomberg

The pound dropped sharply against the dollar last night and stocks fell around the world after unexpectedly high US inflation data raised fears of a recession in the world’s largest economy.

Consumer prices in the US rose by 8.3pc in the 12 months to August, the US Bureau of Statistics said, faster than the 8.1pc economists had expected.

Despite overshooting forecasts, annual inflation fell for the second month in a row and has fallen consistently from a peak of 9.1pc in June.

But core inflation - a measure of price rises excluding the more volatile food and energy indices - rose last month. A large increase in housing costs prompted core inflation to jump from 5.9pc to 6.3pc, close to the March peak of 6.5pc.

The persistence of price rises fuelled market expectations that the Federal Reserve will be forced to push ahead with aggressive rate rises to tame inflation.

The prospect of more large rate rises makes hopes of a so-called “soft landing” for the US economy more remote. Stocks sold off sharply on Tuesday, amid fears that the Fed will be forced to trigger a recession to get inflation under control.

Mark Cabana, Bank of America’s global head of US rates strategy, said in a TV interview on Tuesday: “The Fed is probably going to overdo it. We think that the Fed will try and stick to this higher-for-longer mantra. That’s probably going to result in a recession.”

Goldman Sachs doubled its forecast for the Fed’s expected rate rise in December, predicting a 50 basis point. The investment bank now expects the US interest rate to increase by 175 basis by the end of the year.

The prospect of higher interest rates sparked a rally for the dollar, which send the pound dropping 1.4pc against the US currency to $1.1502.

Investors are now all but certain the Fed will now raise its interest rate target by 75 basis points for the third time in a row when policymakers meet next week.

Recession fears saw the S&P 500 and Dow Jones stock indexes both fall 3pc on Wall Street while the Nasdaq dropped more than 4pc.

JPMorgan, the biggest bank in the US, added to concerns about the health of America’s economy as Daniel Pinto, one of the bank’s most senior executives, said investment banking revenues in the current quarter could be as much as 50pc lower than last year. Rival Goldman Sachs began cutting jobs earlier this week amid a dearth of deals.

Persistent inflation raises the pressure on US president Joe Biden, who is leading his Democratic Party into midterm elections in November that are likely to be dominated by cost of living concerns.

The President said on Tuesday that inflation would take “more time and resolve” but said the data “show more progress in bringing global inflation down in the US economy.”

Housing, food and medical costs were the largest contributors to the monthly rise but these increases were mostly offset by a sharp 10.6pc drop in the gas prices, according to the US Bureau of Labour Statistics.

Food prices jumped by 11.4pc on an annual basis in August, the largest 12-month rise since May 1979. Electricity bills jumped the most since 1981, gaining 15.8pc from the same period a year ago.

Concerns about a downturn in the US saw the FTSE 100 fall over 1.2pc, with similar drops seen on bourses across Europe.

If the Fed opts for a 75 basis point increase next week, it will bring its target range for the federal funds rate to 3-3.25pc. Some analysts have even discussed the possibility of a historical 100 basis point uptick.

The Bank of England’s Monetary Policy Committee will also meet next Thursday to decide on interest rates, following a week-long delay to mourn the passing of Queen Elizabeth II.

The Bank is expected to increase borrowing costs by 0.5 points, although it could opt for an even larger move.

Rupert Thompson, Investment Strategist at Kingswood, said: “Pressure had already been building on the MPC to speed up the pace of tightening as a result of the large fiscal boost represented by the new energy price cap and also the stronger than expected wage numbers released this morning.”

06:37 PM

Wrapping up

That's all from us today, we shall see you tomorrow morning! Before you go, have a look at the latest stories from our reporters:

06:29 PM

FTSE 100 roundup

The FTSE 100 has closed 1.17pc lower, with retailers Ocado and Next, and property development companies Segro and Persimmon plc among the biggest fallers.

Owner of British Airways — IAG also fell by 4.37pc.

Aveva Group saw the largest increase at 3.08pc, followed by healthcare giant Haleon and BP.

06:04 PM

Europe ‘solves puzzle’ on how to survive without Russian gas this winter, says Goldman Sachs

Gas prices in Europe are expected to fall this winter after the continent “successfully solved” the challenge of getting enough gas into storage, a leading investment bank has said.

Rachel Millard reports:

Goldman Sachs expects gas storage sites in Europe to be more than 90pc full by the end of October, following months of high prices which have cut gas usage in Europe and Asia and attracted more shipments of gas to the continent.

Those stocks will help Europe get through the winter despite huge cuts to Russian supplies, the bank said.

It now expects European gas prices to fall below €86 per MWh in the first quarter of 2023, compared to previous forecasts of €94 per MWh. Prices are forecast to fall thanks to “market relief” about making it through winter.

While the price forecast is about four or five times higher than long-term averages, it is far lower than the current prices of around €200 per MWh.

05:58 PM

Sainsbury’s increase staff pay

Sainsbury’s has increased staff pay as part of a £24m package to support its workers during the cost of living crisis.

Retail staff at Sainsbury's and Argos will see minimum pay increase of 25p per hour.

It comes after the retail giant increased basic hourly pay for workers from £9.50 to £10 in January. This totals to a 7.9pc pay increase since January 2022.

Inflation was recorded at 10.1pc in July.

04:41 PM

US energy bills surge

US energy bills have climbed to its highest level since 1981 as the cost of living crisis intensifies.

Gas bills rose by 33pc in July, compared to the same period last year.

Despite gas prices slightly dipping in August, bills were still up by 24pc on August 2021 levels due to the energy crisis in Europe and the hot summer the country endured.

New York’s state grid operator has warned that a “sharp rise in wholesale electric costs [is] expected this winter”.

04:11 PM

UK pay gap set to fuel more strikes

RMT strike outside Kings Cross Station in August - Dominic Lipinski/PA Wire
RMT strike outside Kings Cross Station in August - Dominic Lipinski/PA Wire

UK public sector workers are receiving fewer pay rises compared to their counterparts in the private sector, according to Bloomberg.

Pay growth across the private sector rose by 6pc in three months to July, however public sector pay only increased by 2pc.

“This is bound to feed into the pay claims of public sector unions, whose strike threats — muted at the moment because of the period of Royal mourning — will no doubt return with renewed vigour shortly”, said Len Shackleton, editorial and research fellow at the Institute of Economic Affairs.

Planned train and postal strikes have been suspended as a mark of respect following the death of Queen Elizabeth II.

03:59 PM

Handing over

That's all from me today – thanks for following! Riya Makwana is in the hot seat for the rest of the day.

03:56 PM

Hawksmoor lashes out at pressure to close on day of Queen Elizabeth II’s funeral

Hawksmoor Queen's funeral - REUTERS/Dylan Martinez/File Photo
Hawksmoor Queen's funeral - REUTERS/Dylan Martinez/File Photo

The question of whether businesses should close for the funeral next week is proving divisive, as my colleague Hannah Boland reports:

Top-end steak restaurant Hawksmoor has lashed out at pressure to close on the day of Queen Elizabeth II's funeral next Monday, after a host of businesses said they were shutting as a sign of respect.

Hawksmoor, which runs 10 restaurants in London, Manchester and Edinburgh, said it was planning to keep all its sites open on the bank holiday for the funeral next Monday, aside from its restaurant in Guildhall which it always shuts on public holidays.

Writing on Twitter, Hawksmoor said: “If you want to shut, so you/your staff/customers can grieve or take part in an important national moment, then you should. Just try not to make it sound like you are ‘showing respect for the Queen’ and implying that those doing differently are not.

“Respect for the Queen (to me) suggests tolerance to how others feel or behave, however they grieve (even ‘whether’ they grieve).

“No one should feel that their quiet, respectful decisions are being thrown out for public judgement on social media. There is no ‘right’ answer.”

Read Hannah's full story here

03:37 PM

Centre Parcs to shut all resorts for Queen's funeral

Centre Parcs will shut its resorts across the UK on Monday due to the Queen's funeral.

The holiday group said the move was a "mark of respect and to allow as many of our colleagues as possible to be part of this historic moment".

03:21 PM

New York Times staff refuse to come back to the office

New York Times - Scott Eells/Bloomberg
New York Times - Scott Eells/Bloomberg

The New York Times is facing a staff backlash over its return to the office push, with workers furious that they have been offered free branded lunchboxes instead of a pay rise.

Lucy Burton has more:

Over 1,200 New York Times staff represented by media union the NewsGuild of New York are rebelling against the newspaper this week by refusing to go in, echoing protests around the world as employees demand the right to continue remote working.

Andrea Zagata, a staff editor, wrote on Twitter that employees had been offered "cute" branded lunchboxes as a return-to-office perk this week but said: "We want respect and a fair contract instead".

"Here's the lunch box. It's cute! But my colleagues and I don't need cute trinkets. 330 of us wrote emails last month asking for real raises to combat inflation," she wrote.

The clash comes weeks after Apple staff pushed back against an order to return to the office by arguing they can do “exceptional work” remotely. Chief executive Tim Cook had ordered staff located near Apple’s California HQ to return to the office for three days a week.

Read Lucy's full story here

03:03 PM

Arriva bus strikes called off after Queen's death

Two days of planned bus strikes across Bedfordshire, Buckinghamshire and Hertfordshire have been called off as a mark of respect following the Queen's death.

Arriva said the Unite union had called off industrial action scheduled for September 16 and 20.

A further walkout in a dispute over pay is expected to be held on September 30, the BBC reports.

02:53 PM

LME to trade on Monday despite Queen's funeral

London Metal Exchange funeral - Chris J. Ratcliffe/Bloomberg
London Metal Exchange funeral - Chris J. Ratcliffe/Bloomberg

The London Metal Exchange will remain open for trading on Monday despite Queen Elizabeth's funeral.

The exchange, which is known for its open outcry ring, had been in a bind about whether to remain open or not.

The London Stock Exchange will be closed while most businesses will also shut up shop on what's been designated a bank holiday.

But September 19 is also when metal prices are set for the month's so-called "third Wednesday" benchmarks.

The LME has now said it won't operate its first ring trading, which usually takes place between 11.40am and 12.25pm, but will open for the second afternoon session from 12.30pm to 1.15pm.

02:35 PM

Wall Street slumps on hot inflation data

Wall Street's three main indices dropped sharply at the opening bell after US inflation came in higher than expected in August.

The S&P 500 dropped 1.8pc, while the Dow Jones was down 1.2pc. The Nasdaq was the biggest faller, plunging 2.9pc.

02:25 PM

Reaction: US inflation is 'very sticky'

Seema Shah, chief global strategist at Principal Global Investors, says the new data highlights the "very sticky nature" of US inflation.

Today’s inflation data cements a third consecutive 0.75pc increase in the Fed funds rate next week.

Headline inflation has peaked but, in a clear sign that the need to continue hiking rates is undiminished, core CPI is once again on the rise, confirming the very sticky nature of the US inflation problem.

In fact, 70pc of the CPI basket is seeing an annualised price rise of more than 4pc month on month. Until the Fed can tame that beast, there is simply no room for a discussion on pivots or pauses.

At Jackson Hole last month, Fed Chair Powell clearly noted the need to see a string of slowing inflation data before the Fed can feel confident about the outlook. So far, they have a grand tally of one.

We continue to expect policy rates to increase to 4.25pc as the Fed scrambles to get a grip on inflation, but perhaps it’s time to consider a higher peak rate?

02:08 PM

US futures slide after inflation figures

Wall Street looks set to open deep in the red this afternoon as markets braced for more interest rate rises after the latest inflation figures.

Tech stocks, which are particularly exposed to rates, look set to take the biggest hit at the opening bell.

Futures tracking the tech-heavy Nasdaq slumped 2.4pc.. The S&P 500 is pointing 1.9pc lower, while the Dow Jones shed 1.5pc.

02:02 PM

Markets ramp up bets on Fed rate rises

Traders are taking the higher-than-expected inflation figures as a sign that the Fed will raise interest rates aggressively at its meeting next week.

They're now pricing in more than a 75 basis-point hike.

01:55 PM

Pound slumps against dollar

Here's a graph showing just how sharply the pound has fallen in the wake of the inflation numbers.

Markets are betting on another 75 basis-point increase in interest rates by the Federal Reserve, which is giving a boost to the dollar.

01:50 PM

Reaction: Fed needs to keep raising rates

Alastair George, chief investment strategist at Edison Group says the latest figures underline the need for another big increase in interest rates.

Today’s evidence of a peak in US CPI might be welcome but the figure of 8.3pc was above expectations and only reinforces the need for a further 0.75pc increase in interest rates at September’s FOMC meeting.

Fed Chair Powell’s Jackson Hole speech called for forceful action to control inflation so the Fed now has to deliver.

The sheer magnitude of the deviation of US inflation from target implies a long period of above-target inflation into 2024, even if survey-based inflation expectations are now moving lower.

Nevertheless, global markets have had ample time to adjust to the US Fed’s current trajectory of monetary policy.

With inflation having peaked, once the trough in economic activity is in sight it will be time for investors to look to participate in the ultimate recovery.

01:48 PM

Price rises spread through US economy

The latest US inflation figures have come in hotter than expected, but they also show just how much price rises have spread through the economy.

While the headline consumer price index eased slightly, core inflation (without food and energy) accelerated to 6.3pc.

In fact, energy costs actually fell 5pc, dragged down by cheaper fuel prices. But that was offset by rising prices in almost all other categories.

01:32 PM

US inflation tops forecasts

US inflation has come in ahead of forecasts, in a sign the Federal Reserve may need to stick to its aggressive interest rate rises.

The consumer price index stood at 8.3pc on an annual basis in August. That's down from 8.5pc the previous month, but ahead of expectations.

On a monthly basis, consumer prices rose 0.1pc.

12:27 PM

‘Austerity by stealth’ as Truss's defence boost comes at a cost

Whitehall departments will be looking enviously at the Ministry of Defence (MoD) as inflation-battered budgets are redrawn this autumn, writes Tom Rees.

The MoD will get tens of billions of pounds extra for new weapons and more troops after Liz Truss promised to lift defence spending from 2.2pc of GDP to 3pc by 2030 in response to the war in Ukraine.

The Royal United Services Institute estimates the military pledge would require an extra £157bn in spending over the next eight years.

This extra cash comes on top of a one-off massive energy support package and promised sweeping tax cuts.

At the same time, departmental budgets set just a year ago are being eaten away by soaring inflation. Ministers will be begging for top-ups.

​Read Tom's full story here

12:04 PM

Us futures rise ahead of US jobs data

U.S. stock index futures edged higher as investors awaited key inflation data that could provide cues for how fast and how long the Federal Reserve will hike interest rates in its battle to combat surging prices.

The consumer price index report, due at 1.30pm, is expected to show monthly CPI contracted 0.1pc in August from July, a decrease for the first time in more than two years, while on a year-on-year basis it is seen edging down to 8.1pc.

Futures tracking the S&P 500 and Nasdaq rose 0.5pc, while the Dow Jones was up 0.6pc.

12:03 PM

Google faces £20bn claim for depriving newspapers of ad revenue

Google is being sued for up to €25bn (£21.6bn) over claims it has deprived newspapers and internet bloggers of billions of pounds in advertising revenues.

Matthew Field has more:

The Big Tech giant is facing class action complaints in the UK and the Netherlands that it used its advertising technology to unfairly sideline publishers while hoovering up ad revenues.

The claim is being brought on behalf of all websites and publishers that carry online banner advertising, including newspapers, magazines, blogs and other digital media sites.

Toby Starr, a partner at the law firm Humphries Kerstetter, said alleged UK victims may have potentially lost up to £7bn in revenues since 2014.

“This includes news websites up and down the country with large daily readerships as well as the thousands of small business owners who depend on advertising revenue,” he said, “be it from their fishing website, food blog, football fanzine or other online content they have spent time creating.”

​Read Matthew's full story here

11:50 AM

London hotel prices surge ahead of Queen's funeral

The Goring London hotels funeral - David Cotsworth
The Goring London hotels funeral - David Cotsworth

Anyone hoping to book a hotel room in London ahead of Queen Elizabeth's funeral should be prepared for a big bill.

The average price for a hotel room in the capital this weekend is 30pc higher than it was for the same weekend in 2019, and 39.5pc higher than it was last year, according to Trivago data shared with Bloomberg.

Searches have also doubled compared to the same period before the pandemic.

London hotels have enjoyed a surge in bookings and some of the most prestigious are fully booked. The Royal Family, British political leaders and global heads of state are expected to attend, as well as thousands of members of the public.

The Corinthia, a stone's throw from Whitehall, is fully booked on Sunday and Monday, while The Goring also appears to have no availability.

11:34 AM

Supermarkets to close during Queen's funeral

Elsewhere in the world of retail, supermarkets are planning to shut next Monday for Queen Elizabeth's funeral.

A handful of stores around Westminster will be open to serve the funeral, while some convenience branches will reopen after 5pm.

11:18 AM

Shoppers trade down products as inflation soars

Sales of the very cheapest value own label products are up by a third compared to a year ago, Kantar said, as shoppers hunt for bargains.

Here's more from Laura Onita:

Grocery inflation hit another record high of 12.4pc last month, Kantar said. Milk, butter and dog food are rising especially quickly, at 31pc, 25pc and 29pc respectively.

Mr McKevitt said: “It seems there’s no end in sight to grocery inflation as the rate at which food and drink prices are increasing continues to accelerate.”

The average annual grocery bill will go from £4,610 to £5,181 if consumers don’t make changes to what they buy and how they shop, Mr McKevitt added.

For the fourth month in a row, Lidl was the fastest growing supermarket and recorded its strongest sales performance since Oct 2014.

Aldi’s sales rose by 18.7pc during the period, while Lidl’s sales grew by 20.9pc and its market share increased to 7.1pc.

The German discounters command 16.4pc of the total grocery market compared with about 3pc a decade ago.

Tesco remains the UK’s largest supermarket with 26.9pc market share, followed by Sainsbury’s at 14.6pc.

11:06 AM

Sainsbury's raises pay in £25m cost-of-living support

Sainsbury's pay rise cost of living - REUTERS/Suzanne Plunkett
Sainsbury's pay rise cost of living - REUTERS/Suzanne Plunkett

Sainsbury's has said it's investing £25m in a support package to help staff with the rising cost of living.

The supermarket chain said £20m of the funding will go towards a pay rise for 127,000 workers.

From October 16, Sainsbury’s and Argos hourly retail colleague pay will go from £10 to £10.25 per hour and from £11.05 to £11.30 in London.

The retailer will also give employees access to "basic food items" during their shifts from the first week of October until the end of the year, as well as increased discounts.

Sainsbury's said the extra increase wouldn't affect the timing of the next annual pay review, which will go ahead in the new financial year.

10:44 AM

Pound pushes higher after jobs data

Sterling has nudged higher against a weaker dollar as traders digest jobs data and upcoming inflation figures.

The UK unemployment rate fell to its lowest since 1974 as more people dropped out of the workforce, fanning upward pressure on wages and fuelling expectations of interest rate rises.

Meanwhile, markets are looking ahead to US inflation data due this afternoon.

The pound gained 0.3pc against the dollar to $1.1715. Against the euro it was little changed at 86.67p.

10:29 AM

BoE stress test to reflect energy price surge

Rising energy costs will reportedly feature prominently in the Bank of England's regular stress test of the UK financial system.

The annual test scenario will involve a deep economic recession couple with surging energy bills that could make it harder for businesses and other borrowers to repay their loans, the Guardian reports.

The regulator said in July that real income shocks would be a part of the scenario.

The Bank will publish its scenario for the test this month, with lenders' results expected next summer. The test was due to begin in March, but was delayed due to the war in Ukraine.

10:16 AM

German investor outlook darkens ahead of winter energy squeeze

Investor confidence in Germany's economy has deteriorated further amid growing fears that a winter energy crisis will push the country into recession.

The ZEW institute's gauge of expectations fell to -61.9 in September from -55.3 the previous month – a bigger decline than forecasts. An index of current conditions also dropped.

Achim Wambach, ZEW President, said: "The prospect of energy shortages in winter has made expectations even more negative for large parts of the German industry.

"In addition, growth in China is assessed less favorably. The latest statistics figures already show a decline in incoming orders, production and exports."

09:54 AM

Fevertree shares jump despite rising costs

Fevertree drinks costs - REUTERS/Neil Hall
Fevertree drinks costs - REUTERS/Neil Hall

Shares in Fevertree have pushed sharply higher this morning even after the drinks brand warned on rising costs.

The tonic maker said soaring costs for logistics and production had shaved 6.7 percentage points of its gross profit margin.

It said higher energy and glass prices were being compounded by the need to send stock from the UK to the US in order to meet demand until its east cost production is up to speed.

Still, shares gained more than 12pc as Fevertree maintained its guidance for the full year.

09:35 AM

M&C Saatchi continues to shun 'derisory' takeover bid

Advertising giant M&C Saatchi has reiterated its rejection of the "derisory" £254m takeover offer from its largest shareholder.

M&C said it continues to urge shareholders to "take no action" in response to the bid from rival Advanced Advt (ADV) – the investment vehicle of Vin Murria – and insisted the offer price was now even lower than current values.

M&C said all 18 members of its executive committee remain unanimously opposed to the ADV offer, despite further meetings with the suitor.

It said: "The M&C Saatchi directors continue to believe the ADV offer is derisory.

"They believe that the ADV offer fails to reflect the growth and opportunities in front of M&C Saatchi and does not offer a fair value for the business."

M&C also branded the bid as carrying a "high risk of damaging culture, triggering a talent exodus, revenue loss and value destruction", while a "disregard for US regulatory (CFIUS) filings risks significant revenue loss".

09:20 AM

Woodford managers Link facing £300m fine over fund’s collapse

Neil Woodford FCA Link - Geoff Pugh
Neil Woodford FCA Link - Geoff Pugh

ICYMI – The City watchdog is preparing a fine of up to £306m for the administrator of Neil Woodford’s collapsed income fund, raising the prospect of significant compensation for the thousands of investors who backed the once star stock picker's vehicle.

Simon Foy reports:

The Financial Conduct Authority (FCA) is set to sanction Link Fund Solutions over its role in the collapse of the Woodford Equity Income Fund.

Link was the so-called authorised corporate director of the Woodford Equity Income Fund, which meant it had a duty to monitor the fund and hold the fund manager to account.

Mr Woodford’s fund was suspended in June 2019 after the stock picker, who had built large positions in hard-to-trade shares, was unable to sell assets quickly enough to meet mounting withdrawal requests from investors.

The fund was shut in October 2019, leaving more than 300,000 savers nursing heavy losses.

The FCA said it was “likely” to hit Link with a “financial penalty and/or consumer redress” of up to £306m following an investigation that has lasted nearly three years.

​Read Simon's full story here

09:04 AM

Publisher Future rises on upbeat profit forecast

Magazine publisher Future has jumped to the top of the mid-cap index this morning after it released an upbeat trading statement.

The group, which owns titles including The Week and Country Life, said it had returned to organic audience growth in the second half and expected full-year profits to be at the top end of market expectations.

Analysts at Shore Capital said the "positive" release showed continued strong performance. Shares rose as much as 6.2pc.

08:56 AM

Two of UK's biggest ports brace for strikes

Felixstowe Port of Liverpool strikes - Joe Giddens/PA Wire
Felixstowe Port of Liverpool strikes - Joe Giddens/PA Wire

Two of the UK's largest ports are braced for overlapping strikes later this month, threatening more disruption to supply chains heading into the peak Christmas period.

The engineering department and port operatives at the Port of Liverpool rejected the latest pay offer at a meeting last night, paving the way for a two-week strike starting September 20.

Separately, workers at Felixstowe voted down a pay deal imposed by management, setting the stage for a new round of industrial action. The walkout is set to take place from September 27 to October 5, and follows a previous strike in late August.

It's a further blow to supply chains heading into the peak season for pre-Christmas shipping and a winter of soaring heating bills.

If the two ports’ strikes overlap, the stoppages will temporarily staunch the movement of more than half of the UK’s container exports and imports.

08:40 AM

FTSE risers and fallers

It's a subdued start to the day for the FTSE 100, which is treading water following the latest jobs data.

The blue-chip index was flat in early trading after figures showed unemployment dropped to the lowest level since 1974.

IT group Aveva was the biggest winner, rising 3.4pc following a report that it's nearing an agreement on a £9bn takeover by Schneider.

It was a different story for grocers, however. Ocado crashed more than 13pc to the bottom of the FTSE 100 after it said shoppers were cutting back spending and its own energy bills were soaring.

Meanwhile, Tesco and Sainsbury's were both down more than 2pc as Kantar said grocery inflation soared to a fresh record high.

The domestically-focused FTSE 250 slipped marginally into the red. Magazine publisher Future was the top riser after it lifted its profit forecasts for the full year.

08:18 AM

Aldi overtakes Morrison's as fourth biggest supermarket

Aldi discount supermarket Kantar inflation - Hollie Adams/Bloomberg
Aldi discount supermarket Kantar inflation - Hollie Adams/Bloomberg

Elsewhere in the retail world, Aldi has overtaken Morrison's as Britain's fourth biggest supermarket as surging inflation prompts more shoppers to hunt for bargains.

The German discount chain saw its market share rise by 1.2 percentage points in the latest period as its sales jumped almost 19pc, according to data from Kantar. Rival Lidl grew sales by 21pc and also saw its market share increase.

Meanwhile, many shoppers are trading down to cheaper items. Sales of the very cheapest value own-label products are up by a third compared to a year ago.

It came as grocery inflation hit another record of 12.4pc, adding £571 to the average annual grocery bill.

Fraser McKevitt, at Kantar said:

It seems there’s no end in sight to grocery inflation as the rate at which food and drink prices are increasing continues to accelerate.

In what is a fiercely competitive sector, supermarkets are reacting to make sure they’re seen to acknowledge the challenges consumers are facing and offer best value, in particular by expanding their own-label ranges.

08:07 AM

Ocado shoppers cut back as energy costs hit online supermarket

Ocado inflation cost-of-living crisi - Hollie Adams/Bloomberg
Ocado inflation cost-of-living crisi - Hollie Adams/Bloomberg

Ocado has said its customers have started cutting back as they tighten the purse strings amid a deepening cost-of-living crisis.

The online supermarket said the average basket at checkout was £116 in the 13 weeks to the end of August. That's a 6pc fall, with the level of decline increasing towards the end of the period.

Meanwhile, Ocado said its own costs were spiralling. It expects a tripling of electricity charges and a 15pc rise in fuel costs to add between £20m and £25m to its annual bill.

In a further blow, the company said higher energy prices have also driven up the cost of dry ice, which will potentially add between £15m and £20m to its annual bill.

Ocado warned the higher costs would hit profits for the full year. Shares plunged 9pc following the update.

08:02 AM

FTSE 100 opens flat

The FTSE 100 is treading ground at the open as investors digest the latest troubling jobs figures.

The blue-chip index edged marginally higher to 7,476 points.

07:50 AM

Reaction: Better employment support needed

Stephen Evans, chief executive of the Learning and Work Institute, says more employment support is needed for people who've left the labour market.

The pain from the cost of living crisis is deepening with real regular wages continuing to drop at their fastest rate on records dating back to the start of the century, driven by rising inflation.

Things will get tougher for households with the sharpest rises in the energy price cap still to come, perhaps to over £4,000 per year. The urgency for further emergency support from the Government grows.

The UK also faces a recruitment crunch with employers struggling to fill all their roles, despite 1.9m people either starting work or changing jobs in the last quarter. This is driven by higher numbers of over 50s and people who are long-term sick leaving the labour market.

To tackle these twin challenges we need immediate help and a plan for growth, including better employment support for people who’ve left the labour market. Otherwise, hardship will grow and our economy will be smaller than it needs to be.

07:45 AM

IoD: Labour shortages are very real concern

Kitty Ussher, chief economist at the Institute of Directors, says that while businesses face the threat of labour shortages, some are slowing their hiring plans.

Just when we thought unemployment couldn’t get any lower, it has fallen further to an extraordinary 3.6pc in the 3 months to July, the lowest rate since 1974.

This is good news for households trying to budget in the face of rising costs. Although the effect of inflation has caused real pay to fall – by 2.8pc on the year, causing difficulties for many – the jolt to family budgets from high unemployment would be significantly worse.

More disturbing is the continuing rise in economic inactivity. Some of this is due to having more students, but also to increasing numbers of over-50s being denied the ability to work due to long-term illness.

For businesses, low unemployment means labour shortages remain a very real concern. Having said that, today’s data also suggests some firms are pausing recruitment plans in the face of a weakening economy: the number of vacancies, although still very high, has started to come down.

07:40 AM

Workforce dropouts continue to mount

Here's a bit more on the jobs figures from my colleague Tom Rees:

Workers dropping out of the labour market drove unemployment to its lowest level since 1974 in July as pay packets were dragged back to the same level as 2006.

Unemployment fell 0.2 percentage points to 3.6pc in the three months to July but it coincided with a sharp increase in economic inactivity caused by long-term sickness and more students.

The inflation squeeze has dragged pay packets back to the same level as 2006 with real regular pay falling 4.1pc. The drop came despite wage growth picking up as average earnings excluding bonuses jumped 5.2pc.

The economic inactivity rate - those not in employment or seeking work - jumped 0.4 percentage points to 21.7pc in the three months to July to the highest level in almost six years. Experts have said that increasing long-term sickness is being driven by long Covid and record NHS backlogs keeping people out of work.

It is making the scramble to find workers by businesses even harder but the biggest fall in vacancies since the start of the pandemic suggested that demand from bosses is cooling. Vacancies fell 34,000 to 1.3m in the three months to August.

07:35 AM

Unemployment drops to lowest since 1974

Good morning. 

UK unemployment has tumbled to its lowest level in almost 50 years as more Brits left the workforce.

The latest ONS figures showed 3.6pc of adults were out of work and looking for jobs in the three months to the end of July, down from 3.8pc in the previous quarter.

It came as more people were classed as economically inactive or stopped looking for jobs. Increases in long-term sickness and moves to education meant 194,000 people left the workforce.

The data also showed real wages tumbled to their lowest in almost two decades as inflation continued to outstrip pay rises.

5 things to start your day

1) Trains will run through the night as mourners travel to London - Plans for extra rail services finalised as thousands expected to flock to the capital for Queen Elizabeth's funeral

2) UK teeters on edge of recession after ‘feeble’ rebound - GDP grew just 0.2pc in July, official data reveals, falling below economists’ expectations

3) Covid lockdowns and China help push 50m people into slavery - Another 10m people trapped in forced labour over the past five years, UN agency warns

4) Apple to allow iPhone users to delete and edit text messages - The tech giant updates its iPhone iOS so that users can edit a message for 15 minutes

5) German recession looms as Putin ‘wreaks havoc’ on economy - Eurozone's biggest economy is expected to take two years to fully recover from inflation shock

What happened overnight

Asian stocks rose on Tuesday as traders in Korea returned from holidays in a mood to catch up on a global bounce, while other markets held steady ahead of US inflation data that will offer a crucial guide to the interest rate outlook.

Wall Street indexes posted a fourth straight session of gains overnight, while the US dollar retreated further from milestone highs - partly on hopes that the prices data, due at 12.30pm GMT, might offer another signal that inflation has peaked.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6pc, led by a 2pc jump for South Korea's Kospi. Japan's Nikkei tacked on 0.3pc.

Coming up today

Corporate: Petra Diamonds (full-year results), Haworth Group, JTC, Trustpilot (interims), Ocado Group (trading statement)

Economics:  Inflation (US, Ger), unemployment rate (UK), claimant count change (UK), average earnings (UK), economic sentiment (EU), monthly budget statement (US)